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Profit and Loss Account Items

Profit and Loss account is the account prepared by a business organization to show the net profit or net loss. On the debit side, it shows the expenses incurred by an organization and on the credit side the Gross Profit brought down from trading and other gains. Finally, the profit is carried to the capital account. After all expenses have been deducted from Gross profit, the net profit on the debit side is arrived at which is to be taken to the balance sheet.

Some major items in profit and loss account are identified:

(a) Expenses

(b) Revenue

(c) Profits: (i) Gross Profit (ii) Net Profit

(d) Net loss

(e) Rent receivable

(f) Goods stolen

(g) Goods withdrawn by the owner for own use


(a) Expenses: These are total amount paid or to be paid for resources used in the accounting period, namely:

  1. Discount allowed
  2. Telephone
  3. Lighting
  4. Legal charges
  5. General expenses
  6. Carriage outwards
  7. Postage
  8. Insurance
  9. Advertising
  10. Rent and Rates
  11. Salaries and payable
  12. Commission payable
  13. Travelling expenses.

Lesson tags: Financial Accounting Lesson Notes, Financial Accounting Objective Questions, SS1 Financial Accounting, SS1 Financial Accounting Evaluation Questions, SS1 Financial Accounting Evaluation Questions Second Term, SS1 Financial Accounting Objective Questions, SS1 Financial Accounting Objective Questions Second Term, SS1 Financial Accounting Second Term
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